I have commented briefly on this topic once prior, but I am compelled to offer an additional comment based on the FPA's contradiction of the Commission's estimate of the cost of an audit. As I mentioned in my previous comment, the cost of an audit would be unduly burdensome on smaller firms such as mine. Frankly, given the drop in account values over the past 2 years, an audit that did cost $24,000 (as the FPA suggests) would approach 10% of my firm's GROSS revenue.

To be honest, even at $10,000 the cost of an SEC audit would be the single largest expense of my firm except for health insurance - which covers 2 entire families. It would be a tremendous burden to bear, which would have to be borne by our clients via higher fees. My partner and I could not withstand 10% drops in our income in these times.

We all KNOW that deduction of fees is simply not custody - by any rational standard - and that a ponzi scheme cannot exist with this simple ability. One requires physical custody to abscond funds. Without question, everyone should recognize that agency resources are better utilized exploring and investigating likely transgressors, and those managing larger sums (as that likely equates to a higher # of potential victims), than auditing smaller, legitimate firms. Auditing 100 firms like me (and there are at least that many), would tie up substantial agency manpower, cause undue financial stress on those firms in turn injuring those firms' clients through higher fees, and not likely serve to uncover so much as one substantial transgression - certainly no ponzi schemes.

Can't the Commission find better ways to allocate their resources and weed out criminal activities? I know I could come up with several...